Role: Associate Director
Date: 23rd October 2017
I recently took part in the Pro-Manchester Economics Conference, an annual opportunity to hear from policy makers, think tanks and businesses about the recent successes and future challenges facing Greater Manchester (GM). It was packed with brilliant speakers on a wide range of topics including housing, transport, skills, devolution, productivity and inclusive growth.
I was involved in the panel discussion about EU migration controls and the implications for GM businesses. This is a hugely important issue facing GM. Migrants have played a key role in the recent success of the city region. Foreign born workers account for 80% of all jobs growth in GM since 2000 (this includes both EU and non-Eu migrants). Any future restrictions on immigration could therefore have a major impact on growth. The panel discussed what little we know so far about the Government’s migration policy, and what this could mean for GM employers’ ability to recruit the workers they need.
I argued that the main challenge facing GM is in the low wage and low skilled parts of our economy. Over 40% of EU migrants in Greater Manchester work in low skilled occupations, mainly in hospitality and manufacturing, compared to just 16% of UK born workers. While we still don’t have much detail about the Government’s future migration policy, it is already clear that a core aim of the reforms will be to reduce this reliance on low cost EU migrant labour.
Taken together with other changes such as the ramping up of the National Living Wage, employers of low wage workers face a potential double whammy of labour supply shocks which will see salary costs rise just as a vital source of labour is restricted. Many low wage employers will need to make significant changes to their working practices in order to survive. Higher wage employers are much less dependent on EU migrants and should still be able to recruit from overseas, albeit with additional costs.
Employers may adapt to this challenge in a number of ways, including investing in training or labour saving technology (the rise of robots gets a bad press but may have come at just the right time in Brexit Britain), re-organising production processes or moving into higher value markets. Firms will need to lead this but the Government can help increase the chances of success.
This may mean developing local business support programmes that specifically target the low wage sectors that are most at risk. This would be a departure from current programmes which tend to prioritise high value sectors, but could still pay dividends in terms of higher productivity. A 2016 report by IPPR found that the gap in productivity between the UK and other countries in western Europe was greater in low wage than high wage sectors. This was mainly put down to lower levels of investment in training and technology by UK businesses. Now that access to a plentiful supply of low cost labour appears to be at an end, this could in turn force businesses’ hand to improve their productivity.
Low wage migration controls may also provide an added impetus for the public and private sector to work collaboratively to help long term unemployed and inactive people back in to employment. This could include sector based projects, such as the joint initiative by the DWP and the British Hospitality Association which aims to attract young people not in education, employment or training (NEET) into the hospitality industry and has so far created tens of thousands of apprenticeships. This is a significant opportunity in GM where there are currently 80,000 unemployed residents and a further 120,000 inactive people who would like to work. We might now see a greater push by employers to engage these groups if their access to EU migrants is restricted.
The public sector could also support businesses by expanding the size of the local workforce and offering them an alternative to EU migrant labour. This could mean affordable childcare schemes, support for people with caring responsibilities or initiatives which promote the benefits of flexible working (which could help older or disabled people or those with families). Devolution of the adult skills budget, health and employment programmes in GM mean that decisions about what works best can now be made locally.
None of this will happen overnight, nor will it be easy. Employers will need time to adjust to the new system and plan their adaptation strategies. Government will need to commit a lot more resources to understanding the specific needs of different industries, assessing their potential to adapt and the time it will take to do so. It calls for a considered and flexible migration policy which states the long-term goal but minimises the pain along the journey. This could mean placing few limits on low skilled migration in the short term while giving employers plenty of warning about how the regime will change.
It’s fair to say most delegates at the conference were struggling to see the bright side of Brexit. I do too, but there is at least one vision of the future for GM where we have used this as a stimulus to address the longstanding challenges of poor productivity and inclusive growth.
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